"On Monday, January 26, 1998, June Zwan was speaking on the phone early in the morning with Jackie. June told Jackie that Bryan and June had read the knowledge report prepared by Chuck Anderson and that it detailed a long series of illegal and unethical actions Denise had committed as a Digital Lightwave officer."

Although he was never a Scientologist, former Digital Lightwave senior vice-president Seth Joseph got a crash course in the Church's "ethics" system on January 25, 1998 after Digital technician and Scientologist Chuck Anderson penned an explosive expose on alleged fraudulent accounting practices used by the company's administrative vice-president, Denise Miscavige Licciardi.

Written in the form of a "Knowledge Report," a formal complaint written by Scientologists about wrongdoings of other Scientologists and submitted to the Church, Anderson's document claimed that Licciardi had overstated Digital sales, as well as falsely claiming that unfinished and untested equipment was ready for market. To make matters worse, the Anderson allegations came just two days after Digital Lightwave had been forced to issue a restatement of third quarter earnings for 1997 after accounting errors surfaced that had considerably overstated the company's profits for the year.

On learning of Anderson's report, Joseph knew that the allegations, if true, had the potential to put Digital in legal hot water for filing deliberately falsified financial statements with the Securities and Exchange Commission. He met with Digital Lightwave CEO Bryan Zwan immediately to push for Licciardi's immediate termination.

In personal notes made immediately following the events surrounding the Anderson revelations, Joseph recalls that at first, Zwan agreed that the company had no option but to fire Licciardi immediately. However, after a mysterious mid-afternoon meeting in Clearwater, headquarters of the Church of Scientology, Zwan reversed his position.

Zwan
explained to Joseph that firing Licciardi would have serious consequences for his position within the Church of Scientology, since Licciardi was the twin sister of David Miscavige, the Church's highest ranking ecclesiastical leader and Chairman of the Board of Scientology's Religious Technology Center. In fact, Zwan told him that if he fired Licciardi, he would have no choice but to fire Joseph as well, "to placate the other Scientologists."

At that point, Joseph felt he had no choice but to blow the whistle on Licciardi's alleged fraud, and he called the lead counsel for the Special Committee made up of Digital's outside directors that had been hastily struck days earlier to investigate the apparent inconsistencies in the company's revenue statements. Two days later, he was terminated from his position at Digital.

Claiming that he had been wrongfully dismissed for refusing to go along with the inventory fraud, Joseph took Digital Lightwave to arbitration in mid-1998. Although he voluntarily dismissed many of his claims in 2000, in late 2001, the Abritrator found in Joseph's favour on the remaining charges, including wrongful dismissal under Florida's whistle blower protection legislation, and awarded him $3,896,487 in damages.

Digital appealed the ruling, arguing that the arbitrator was "biased" against the company, and the case is currently before the Pinellas court in Florida.

In November 1993, several years before Digital Lightwave went public, a Scientologist businessman named Brian Haney bought into the dream being sold by the company's founder and CEO, fellow Scientologist Dr. Bryan Zwan, and invested $5 million dollars in Digital, which bought him a 50% ownership stake in the company.

But after Haney's wife was expelled by the Church of Scientology, however, the cosy business relationship between Haney and Zwan became increasingly strained. At the same time, Dr. Zwan's once-optimistic predictions of Digital Lightwave's imminent success became bleak foretellings of looming financial doom. He offered to buy Haney's remaining shares in the company, claiming that otherwise, they would soon become worthless, and Haney agreed. Little did he know that at the same time, Dr. Zwan was craftily orchestrating an Initial Public Offering for Digital shares that would have netted Haney over $230 million if he hadn't sold his shares back to the company.

Click here for the full story of the troubled history surrounding Digital's early years.

When news of Digital Lightwave's accounting woes made it to the public, in the form of an obliquely worded earning "restatement" issued by the company on January 23, 1998, the revelations were greeted not only by the inevitable tumble in Digital's stock price and a flurry of class action lawsuits, but also sparked an investigation by the Securities and Exchange Commission.

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